UPDATE: Nov. 17, 2020: The story has been updated with a new press release. 

Dive Brief:

  • Bang Energy is terminating its exclusive distribution partnership with PepsiCo, which the energy drinks maker said is no longer the exclusive distributor of its products, the Florida company said in a press release. The distribution partnership between the two companies began in April. 
  • In a statement emailed to Food Dive, PepsiCo said it was “disappointed” by Bang owner Vital Pharmaceuticals’ decision, “especially given the rapid success we’ve had in significantly expanding the presence and availability of Bang Energy drinks.” PepsiCo, which said it remains the exclusive distributor of Bang Energy drinks across the U.S. through October 2023, said it would fulfill its commitment under the deal, “while also defending and enforcing our exclusive rights granted in the agreement.”
  • Bang said it gave PepsiCo notice of termination as its exclusive distributor on Oct. 23, “citing multiple issues and concerns regarding PepsiCo’s performance.” Jack Owoc, CEO of Bang Energy, stated, “We sincerely expected PepsiCo to execute at an even higher level based on their enormous resources and promises. Unfortunately, we were wrong. PepsiCo, you’re fired.”

Dive Insight:

In announcing the end of the partnership signed just seven months ago, Bang’s outspoken CEO did not mince words in his disappointment in the global beverage and snack giant. While it’s uncertain exactly what led to the abrupt breakup, PepsiCo already had its hands full with its $3.85 billion deal announced in March to buy Rockstar Energy. PepsiCo CEO Ramon Laguarta​ said Rockstar accelerated the company’s move into more “consumer-centric brands and capitalize on rising demand in the functional beverage space.”

Before the Rockstar acquisition, PepsiCo used its Mountain Dew platform to brand its energy drinks, such as Kickstart, Game Fuel and AMP. By acquiring Rockstar, PepsiCo immediately had an even larger and more immediate presence in the energy drink space. PepsiCo signed a distribution agreement in 2009 with Rockstar and was intimately familiar with the brand.

What Bang means when it stated that it had concerns with PepsiCo’s “performance” is unclear and the company did not respond to requests for comment as of press time. It’s possible the energy drink company was upset with PepsiCo devoting, and rightly so given the nearly $4 billion price tag, too much time to its Rockstar acquisition. It may have believed it was not getting the distribution and shelf space it was promised — an allegation denied by PepsiCo. Despite the reach PepsiCo has, Bang’s statement shows it feels it can do better on its own when the deal officially ends. 

“It certainly is weird, in fact very weird considering they established their partnership so recently,” said Caleb Bryant, an associate director of food and drink at Mintel. “The statement from Bang is quite curious. The deal seemed advantageous for both parties when it was penned in April but clearly something didn’t work out.”

In Nielsen data ended Sept. 5, the firm said Bang sales were down 4.3% from the previous 12 weeks and up 17.1% in the prior year. During the same period, PepsiCo’s energy drink sales, including Rockstar, were down 6.7% for the previous 12 weeks and down 8.2% for the last year — a sign the beverage giant still has work to do to reinvigorate the brand.

In a statement posted on Seeking Alpha, Bank of America said the breakup could be beneficial to Monster Beverage whose Reign Performance Energy drink competes with Bang. “Investor concerns that PEP’s partnership with Bang would lead to greater distribution and source market share from MNST should now largely dissipate,” the firm said.

The U.S. energy drink sector is one of the strongest performers in the nonalcoholic space. Sales totaled $9.3 billion in 2014 and are projected to more than double to $19.2 billion in 2024, according to Mintel.

Soda manufacturers have been expanding their reach into other beverage categories such as tea, water, sports drinks and energy drinks as consumers move away from sugar-laden offerings. In January, Coca-Cola, which owns an 18.5% stake in Monster, launched its new Coca-Cola Energy line designed to appeal to cola drinkers rather energy drink consumers. The latest war of words between Bang and PepsiCo shows the fierce competition that exists in the space, and will likely linger for some time as companies compete for a bigger share of the energy drink sector.

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